Correlation Between State Bank and SoftBank Group

Can any of the company-specific risk be diversified away by investing in both State Bank and SoftBank Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining State Bank and SoftBank Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between State Bank of and SoftBank Group Corp, you can compare the effects of market volatilities on State Bank and SoftBank Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in State Bank with a short position of SoftBank Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and SoftBank Group.

Diversification Opportunities for State Bank and SoftBank Group

-0.46

Correlation Coefficient

State Bank  SoftBank Group

Very good diversification

The 3 months correlation between State and SoftBank is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and SoftBank Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftBank Group Corp and State Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on State Bank of are associated (or correlated) with SoftBank Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftBank Group Corp has no effect on the direction of State Bank i.e., State Bank and SoftBank Group go up and down completely randomly.

Pair Corralation between State Bank and SoftBank Group

Assuming the 90 days trading horizon State Bank is expected to generate 1.71 times less return on investment than SoftBank Group. But when comparing it to its historical volatility, State Bank of is 1.88 times less risky than SoftBank Group. It trades about 0.19 of its potential returns per unit of risk. SoftBank Group Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  577,494  in SoftBank Group Corp on March 5, 2024 and sell it today you would earn a total of  326,706  from holding SoftBank Group Corp or generate 56.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	81.15%
Values	Daily Returns

State Bank of  vs.  SoftBank Group Corp

State Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in State Bank of are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, State Bank may actually be approaching a critical reversion point that can send shares even higher in July 2024.

SoftBank Group Corp

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SoftBank Group Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SoftBank Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with State Bank and SoftBank Group

The main advantage of trading using opposite State Bank and SoftBank Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Bank position performs unexpectedly, SoftBank Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SoftBank Group will offset losses from the drop in SoftBank Group's long position.

The idea behind State Bank of and SoftBank Group Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.